Mortgage applications take huge step back

Just a week after a big step forward for the number of mortgage applications filed with lenders nationwide, the number slumped by a similarly large amount last week, indicating that a major improvement for the housing market might be a little harder to come by in this regard.

In all, home loan requests filed for both purchases and refinances fell a combined total of 9.2 percent in the week ending June 13, from the previous seven-day period, according to the latest Weekly Mortgage Applications Survey from the Mortgage Bankers Association. However, this was mainly driven by a 13 percent drop in refinance applications, because those for purchases slipped just 5 percent (but also stood at 15 percent below the level seen in the same week last year). Consequently, refinances made up just 52 percent of the market, down from 54 percent a week earlier.

“Interest rates increased relative to the previous week, as incoming economic data continues to suggest a pickup in the pace of growth,” said Mike Fratantoni, chief economist for the MBA. “Although the average rate for the week was up only a few basis points, the increase was matched by a large drop in refinance volume, and purchase application volume also declined.  Some lenders continue to report that they have pre-approved borrowers who have been unable to find a property given the tight inventory in certain markets.”

How much did rates rise?
Over the course of last week, the average rate for a 30-year fixed mortgage – used primarily for purchases – ticked up to 4.36 percent from the previous 4.34 percent, the report said. Meanwhile, those for 15-year FRMs – mostly used in refinances – increased far more significantly, rising to 3.5 percent from the prior week’s 3.43 percent. That likely explains the significant aversion shown by current owners to cutting their ongoing interest rates.

However, those who haven’t yet refinanced may not want to wait too much longer. Most experts believe that rates – and prices – will likely climb to higher levels before the end of the year, potentially slashing consumers’ available affordability significantly. While the rates seen today are certainly up from the near-record lows seen early last year, they’re still quite affordable in comparison with historical norms.

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